Bombay High Court Rules in Favor of Bank Employees, Orders Inclusion of Special Allowance in Pay Fixation

The Bombay High Court has ruled in favor of employees of nationalized banks who were deputed to work at Debts Recovery Tribunals (DRTs), stating that their “special allowance” should be included in the calculation of their pay fixation. The court quashed a 2020 government communication that had excluded this allowance, ruling that it contradicted earlier directives and an important settlement.

The petitioners, employees of various nationalized banks, were deputed to DRTs under a 2017 Ministry of Finance circular. Prior to their deputation, their salaries included a “special allowance” component, which was also used to calculate their dearness allowance (DA). However, a government letter issued on October 1, 2020, excluded this “special allowance” from pay fixation and pensionary benefits. The petitioners challenged this decision, claiming it violated earlier communications and the 2015 Bipartite Settlement, an agreement between banks and employees’ unions that outlines what components should be considered as part of “pay” for calculating pension, DA, and other benefits.

Represented by lawyer Mr. Avinash Deshmukh, the petitioners argued that excluding the “special allowance” was arbitrary and unfair. They pointed out that the 2015 Bipartite Settlement clearly defined “pay” to include various allowances, including the special allowance, for DA calculation. They argued that the exclusion of this allowance would reduce their effective salaries during deputation and cause financial losses.

On the other hand, the respondents, represented by lawyer Mr. S.S. Deve, defended the 2020 letter, claiming it was merely a clarification and not a policy change. They argued that the “special allowance” was always a separate component from basic pay and should not be included in pay fixation.

The court, however, found in favor of the petitioners. It noted that the 2009 Ministry of Finance communication clearly stated that allowances, including special allowance, should be considered in pay fixation for DA calculation. The court further observed that the 2020 letter misinterpreted the 2015 Bipartite Settlement, which allowed the inclusion of the special allowance in DA calculations, even though it excluded it from pensionary benefits.

The court concluded that the 2020 communication was inconsistent with the 2009 directive and the 2015 settlement, and quashed it to the extent that it excluded the special allowance from pay fixation. The court directed the respondents to fix the petitioners’ pay in accordance with the 2009 communication.

Case Reference: Adarsh Kumar Jain and Others v. Union of India

Neutral Citation: 2024:BHC-AUG:29773-DB

Counsel for Petitioners: Mr. Avinash S. Deshmukh with Mr. P.B. Chandel

Counsel for Respondents: Mr. S.S. Deve